Initial Public Offerings to Headline Nigeria’s Stock Market Rebound

In
mid-April Rob Shuter, CEO of South African-headquartered telecoms firm MTN,
said the company expected to finalise a partial float of its Nigerian unit on
the Nigerian Stock Exchange (NSE) by the end of the year.

Local
and international media have reported MTN could sell off as much as 30% of its
Nigerian operations as part of the IPO, which was agreed to as part of legal
action in 2015 that saw the company fined N330bn ($913m) for failing to meet a
deadline to disconnect unregistered subscribers from services.

With
more than 65m phone subscribers as of April – representing an estimated 41%
market share – and pre-tax earnings of R14bn ($1.1bn) last year, according to
statements lodged in its home market of South Africa, the company is a major
player in the Nigerian market.

Prospects
for the float would appear positive, with MTN Ghana’s IPO, which opened at the
end on May and will end on July 31, expected to raise some GHS3.5bn ($743m),
according to press reports.

If
carried through, the MTN Nigeria float would be the first IPO on the NSE since
January 2015, and comes after the country exited a 21-month recession at the
beginning of the year.

New
share offerings to boost bourse activity

The
interest generated by MTN’s listing on the NSE could also be followed by the
prospect of further activity in the near team, as other companies look to
deepen their capital holdings.

For
example, on May 16 Tinuade Awe, the NSE’s executive director of regulation,
told local media the exchange was in talks with Skyway Aviation Handling and an
unnamed financial technology firm on the possibility of them listing on the
exchange.

This
came after shareholders from domestic company Med-View Airline approved the
board’s plans for recapitalisation in April.

Med-View,
which first listed on the NSE in January last year, will offer some 2.2bn
shares for subscription, with the capital generated to help the company expand
into new domestic markets.

These
moves should boost capitalisation on the bourse and attract both domestic and
foreign investors. While strong, total capitalisation of the NSE has eased in
recent times, sliding from an all-time high of N16.2trn ($44.8bn) on January 18
to just over N14.1trn ($39bn) by mid-June.

With
more than $6bn in capital inflows entering the country in the first quarter of
the year, a 600% year-on-year increase on 2017, industry officials believe the
improved economic climate could lead to an increased flow of IPOs onto the
market.

“Supportive
macro conditions, including declining inflation and interest rates, should lead
to bond and commercial paper issuances, with companies looking to take
advantage of low interest rates to raise both short- and long-term funding from
Nigeria’s debt capital markets,” he added.

Streamlined
exchange process to encourage more IPOs

To
further incentivise listings and public buy-ins in the future, the NSE and
market regulator the Securities & Exchange Commission have been working
with partners to streamline the IPO process.

A
special committee has been established to look at the proposed full automation
of the primary issuance process, allowing for the processing, approval,
documentation, subscription and allotment of all issues – such as IPOs and
public offers – to be carried out online.

If
adopted, automation is expected to increase transparency in the issuance
process, reduce processing time and boost investor confidence in Nigeria’s
capital markets, which could translate into increased foreign investment.